I think the dude rejects Arashi’s advances simply by the virtue of adhering to genre cliches.

Men are normally more optimistic than that. She’s not his sister, and they’re both underaged. I call bullshit on him not laying a finger on her despite supposed hormonal changes all boys go through at his age.

I am not sure what he does or does not know but at the very least she knows they are cousins. The story gets more complicated in the manga, I recommend it seeing as they are leaving out one important detail I don’t want to ruin here.